Banks raises $10 through NRE deposits

From August 2011 the Rupee has regularly fallen because of the wider trade deficit. This trade deficit is regularly increases due to the high import of crude oil , Gold and other products  and lower exports of the Indian products. For controlling the import of Gold, Government has increased the tax on it but there is no strong policy is made to decrease the consumption of crude oil.

As the demand of dollar is regularly increasing because of higher imports, it started to depreciate the value of rupee. To tackle this problem Reserve Bank of India liberalized the interest rate on NRE deposits. Now, banks are offering 9% or more for one year deposit on NRE or non resident rupee deposit. As the result of this, Banks raises $10b through NRE deposits.

This time whole world is facing the economic uncertainty and so, the local market such as USA and Europe offer negligible returns for NRIs.

AS the value of rupee is regularly falling from 1 Year and The government is thinking about various economic reform policies to improve the status of its currency. Some of the steps are already taken by the government such as the increase in the investment limit in the Government and infrastructure bonds and decrease in the lock in period for it.

So, It is expected that value of rupee will appreciate in near future and it will give a good benefit to the NRE deposit holders.